Weekly Energy Market Update - 16/12/2019

16 Dec 2019

Home Weekly Energy Market Update - 16/12/2019

Last Week’s Pricing & Commentary



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Jan 20





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Jan 20





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Feb 20





Last week saw UK power and gas pricing continue its journey downwards, despite an interesting end to the week. Front month, Summer 20, Winter 20 and Q1 20 gas lost 3.18 p/therm, 2.07 p/therm, 1.06 p/therm and 2.70 p/therm from Monday’s open to Friday’s settlement. Losses had looked like they were going to be limited by a strong move up on Thursday which saw front month gas gain 2.87 p/therm (7.5%) on the day, pulling the curve up with it. This seemed linked to a short NTS, weaker wind and momentum buying on the contract looking oversold. However, the NBP opened weak on Friday on the NTS returning to balance and the UK General Election results showing a strong Conservative majority which removed uncertainty premiums and pushed sterling higher. Losses were then exacerbated by positive news coming out of Russian-Ukrainian gas transit talks including rumours that an initial agreement had been reached. Despite these rumours being unconfirmed and no deal being struck, with European storage nearly full and the amount of LNG expected to reach European shores in the coming weeks, the news saw the front month contract post a loss of almost 3 p/therm from Thursday to Friday’s settlement. The day-ahead/front month spread is still sitting around 4 p/therm, perhaps showing there is still room for futures to fall.

UK Power pricing followed gas lower with front month, Summer 20, and Winter 20 baseload contracts posting respective losses of £2.35/MWh, £1.62/MWh, and £1.22/MWh. Wind forecasts and outturn values continued to drive the prompt power market however with lower wind forecasted for the first half of week 51 we could see power pricing supported. Carbon pricing over the week followed a similar pattern to gas with losses felt for much of the week apart from Thursday, where Dec 19 EUAs gained €0.70/tonne on the day. Friday was interesting for the contract as it opened €0.35/tonne above Thursday’s settlement on the outcome of the UK General Election and traded up to highs of €25.92/tonne. However, later in the day bears took hold and the contract went on to lose €1.40/tonne on the day settling just above the €24/tonne level despite being pushed briefly below.

Brent Crude strengthened over the course of the week, posting a healthy gain on Friday as the election results helped to reduce uncertainty and strengthen the pound. Also supportive was the news that the US and China had reached a ‘phase-one’ deal that would see the US stop almost $160 billion worth of tariffs from going ahead and China agree to purchase an unspecified amount of American agricultural products. The culmination of these news pieces along with OPEC+ agreeing to deepen and extend supply cuts has seen Feb 20 Brent trade up to close to 3-month highs, which includes the jump from the drone attack on Saudi infrastructure.

This Morning’s View
UK gas has opened slightly weaker again with front month and Summer 20 gas currently 0.08 p/therm and 0.22 p/therm below settlement. National Grid is reporting the NTS as undersupplied by around 15 mcm and wind output is expected to decrease over the day, which could limit losses and provide support to prompt and near curve power and gas contracts. Dec 19 EUAs opened above settlement, however the contract quickly traded down to lows of €23.55/tonne before trading back up to flat to settlement. Volatility in carbon pricing is expected to remain high today as traders decide fair value for contract expiry. Feb 20 Brent is currently $0.08/barrel above settlement.

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